Elon Musk’s artificial intelligence lab, xAI, is steadily progressing toward turning profitable by 2028, significantly faster than its competitors. According to a transcript of an investor call reviewed by Forbes, the company currently has $10 billion in cash reserves in the bank. According to information shared by Jonathan Shulkin of Valor Equity Partners during a meeting with potential investors, xAI’s revenue is growing rapidly, and the company aims to become cash flow positive in approximately 2.5 to 3 years. It’s also reported that the company is in the process of selling a new $15 billion equity round, and investor demand could push this figure even higher.
A new era in the AI wars: xAI has $10 billion in its coffers
Compared to other giants in the industry, xAI’s goal appears quite ambitious. For example, OpenAI doesn’t expect to be cash flow positive until 2030 due to its massive $1.4 trillion commitment to spend on AI infrastructure. Another competitor, Anthropic, is following a similar timeline to xAI, projecting to breakeven in 2028. A spokesperson for xAI responded briefly to a request for comment, saying only, “Old Media Lies,” while representatives from Nvidia and Valor Equity Partners declined to comment.
xAI is using a creative financing model to secure access to the computing power critical to its future success. Because the cost of building data centers can reach $20 billion to $30 billion, the company has established a dedicated financing vehicle called “Valor Compute Infrastructure” instead of an outright share sale. This structure aims to reduce the company’s capital cost by purchasing data center hardware (Nvidia chips and infrastructure) and leasing it to xAI. Through this vehicle, xAI is raising $7.5 billion in cash and additional debt financing from Nvidia and other private equity firms.
This financing vehicle plans to purchase $22 billion in hardware. According to records, Nvidia is expected to spend $5.3 billion on its currently operational GB200 hardware, and to order more advanced GB300 chips worth over $10 billion early next year. Company officials emphasize that the cost of raising capital through share sales is very high, making this leasing model the most cost-effective and innovative way to finance assets.
In the AI race, companies’ billion-dollar infrastructure investments and profitability targets are becoming increasingly competitive. Elon Musk’s aggressive financing strategy and his goal of turning a profit before OpenAI could shift the balance of power in the sector. What are your thoughts on these massive investments and the future of AI companies? Do you think the development of AI tools will yield results that are worth these costs?
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